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ch07

Chapter7

SELECTINGTHECHANNELMEMBERS

TeachingNotes

Thefocusofthischapteristheprocessofselectingthecorrectchannelmembers（describedas“strong”）whocanperformthedistributiontasksmostefficiently.Emphasisshouldbeplacedonthedelineationofthedistributiontasks,priorchannelmemberselection,andonthehumanelementofmanagingtheindividualchannelmembers.

ThischaptercontinuestheprocessstartedinChapter6andexploresthelastphaseofchanneldesign–selection.

ChapterObjectives

Theselectionofchannelmembersisthelast（seventh）phaseofchanneldesign.Theselectionprocessconsistsofthreebasicsteps:

（1）findingprospectivechannelmembers,

（2）applyingselectioncriteriatodeterminewhetherthesemembersaresuitable,and（3）securingprospectivemembersforthechannel.

Eachfirmmustdevelopitsownlistofcriteriaforchannelmembersforitsparticularobjectivesandallowforflexibilityforchangesinpoliciesandobjectives.Animportantpointtonoteisthatchannelmembersdonotalways“standinline”tobeselectedbyproducersandmanufacturers.

Learningobjectives

1）Haveanappreciationfortheimportanceofchannelmemberselection.

2）Understandtherelationshipbetweenchannelmemberselectionanddistributionintensity.

3）Knowthemainsourcesforfindingprospectivechannelmembers.

4）Befamiliarwithgeneralizedlistsofselectioncriteria.

5）Recognizetheneedforadaptingselectioncriteriatotheneedsofparticularfirms.

6）Realizethatchannelmemberselectioncanbeatwo-waystreet.

7）Appreciatetheneedtoofferinducementstoprospectivechannelmemberstosecurethemasactualchannelmembers.

8）Recognizethehumansideofchannelmemberselectionandtheroleoffairandfriendlyrelationshipsinchannels.

ChapterTopics

1）ChannelMemberSelectionandChannelDesign

2）TheSelectionProcess

3）FindingProspectiveChannelMembers

4）ApplyingSelectionCriteria

5）SecuringtheChannelMembers

ChapterOutline

ChannelMemberSelectionandChannelDesign

Channelselectiondecisionsarefrequentlynecessaryevenwhenchannelstructurechangeshavenotbeenmade.Firmsmayneedadditionaloutletstoallowforgrowthortoreplacechannelmembersthathaveleftthechannel.

Channeldesignispresentedasadecisionfacedbythemarketer.

Asageneralrule,thegreatertheintensityofdistribution,thelessemphasisonselection.

Ifafirm’semphasisistoensureintensivedistribution,thoseintermediariesselectedareoftenselectedonlyontheirbasisoftheprobabilityofpayingtheirbills.Ontheotherhand,ifchannelstructurestressesmoreselectivedistribution,theprospectivemembersshouldbemuchmorecarefullyscrutinizedandselectiondecisionsbecomemorecritical.

TheSelectionProcess

Threestepsareinvolved:

1.Findingprospectivechannelmembers

2.Applyingselectioncriteriatodeterminethesuitabilityofprospectivechannelmembers

3.Securingtheprospectivechannelmembersasactualchannelmembers

FindingProspectiveChannelMembers

Themostimportantsourcesforfindingchannelmembersarelistedbelowintheirorderofimportance.

1）Fieldsalesorganizations

2）Tradesources

3）Resellerinquiries

4）Customers

5）Advertising

6）Tradeshows

7）Othersources

1）FieldSalesOrganizations

Companysalespeopleareinthebestpositiontoknowpotentialchannelmembers,usuallybetterthananyoneelseinthefirm.Companiesmaynotadequatelyrewardsalespeoplefortheireffortsinfindingpotentialchannelmembers.

2）TradeSources

Tradesourcessuchastradeassociations,tradepublications,directories,tradeshows,andthe“grapevine”areallvaluablesourcesofinformationaboutprospectivemembers.

Tables7.1and7.2providelistingsofanumberofwholesaleandretailtradeassociations.

3）ResellerInquiries

Manyfirmslearnaboutpotentialchannelmembersthroughdirectinquiriesfromintermediarieshandlingtheirproducts.

4）Customers

Customersofprospectiveintermediariescanbeasourceofinformation.Usinginformalorformalsurveysoftheviewsofcustomers,afirmmaywellbeabletogaininsightsaboutthestrengthsandweaknessesofaprospectivechannelmemberfromthecustomer’s（enduser）pointofview.

5）Advertising

Advertisementsintradepublicationsofferanotherapproachtofindingchannelmembers.

Figure7.1showsanadinIndustrialDistributionforalineofindustrialhoses.

Figure7.2showsanadforMAGLITE®flashlights.

6）TradeShows

Tradeshowsorconventionscanbeaveryfruitfulsourceforfindingpotentialchannelmembers.Manytradeassociations,attheindustrialandretaillevels,holdannualconventionsatwhichnumerousrepresentativesfromthevariousorganizationsarerepresented.

7）OtherSources

Somefirmsalsofindthefollowingsourceshelpfulinlocatingprospectivemembers.

a.Chamberofcommerce,banks,andlocalrealestatedealers

b.Classifiedtelephonedirectoriesoryellowpages

c.Direct-mailsolicitations

d.Contactsfrompreviousapplications

e.Independentconsultants

f.Listbrokersthatselllistsofnamesofbusinesses

g.Businessdatabases

h.TheInternet

ApplyingSelectionCriteria

Havingdevelopedalistofprospectivechannelmembers,thenextstepistoappraisetheseprospectsinlightofselectioncriteria.Ifafirmhasnotyetdevelopedasetofcriteriaforselectingchannelmembers,itmustdevelopone.However,nolistofcriteria,nomatterhowcarefullydeveloped,isadequateforafirmunderallconditions.

1）GeneralizedListsofCriteria

Brendeldevelopedalistof20keyquestionsforindustrialfirmstoasktheirprospectivechannelmembers.

Thislistofquestionsisposedonpage231ofthetext.YoumaywanttoopenuptheclassfordiscussionatthispointandseeifclassmemberscanaddanyadditionalquestionstothislistoraskifthislistisstillapplicabletotodaywiththeadventoftheInternet.

HlavacekandMcCuistion,arguethatfortechnicalproductssoldintheindustrialmarket,manufacturersshouldselectdistributorswhocarryasmallratherthanlargearrayofproducts.Theyarguethatwithasmaller,ratherthanalarger,arrayofproductscarriedmoreattentionwillbepaidtoaparticularmanufacturer’sproduct.Theyalsoarguethatthepotentialchannelmember’smarketcoverageshouldbespecifiedascriteriaforselection.Further,theybelievethatthefinancialcapacityofthepotentialchannelmembershouldnotbeoveremphasizedbecausesometimeslessfinancedfirmsare“hungrier”andmoreaggressive.

Shipleyreportsthatthereshouldbe12criteriagroupedunderthreebasiccategories:

（1）salesandmarketfactors,

（2）productandservicefactors,and（3）riskanduncertaintyfactors.

Table7.3showsthesecriteriabyShipley.

YeohandCalantoneidentifysixmajorcategoriesofselectioncriteria:

（1）commitmentlevel,

（2）financialstrength,（3）marketingskills,（4）product-relatedfactors,（5）planningabilities,and（6）facilitatingfactors.Thesearereferredtoas“corecompetencies”thatdistributorsmustpossessforeffectiverepresentationinforeignmarkets.

ThemostcomprehensiveanddefinitivelistofchannelmemberselectioncriteriaisstillthatofferedoverthreedecadesagobyPegram.Tenofthesearediscussedbriefly:

A）CreditandFinancialCondition

Theinvestigationofthecreditandfinancialpositionofprospectiveintermediariesisvital.

B）SaleStrength

Notonlythequalityofthesalespeoplebutalsotheactualnumberofsalespeopleemployed.

C）ProductLines

Manufacturersweregenerallyfoundtoconsiderfouraspectsoftheintermediary’sproductline:

（1）competitiveproducts,

（2）compatibleproducts,（3）complementaryproducts,and（4）qualityofthelinescarried.

1.Manufacturersgenerallytrytoavoidintermediarieswhocarrydirectlycompetitiveproductlines.Manytimesbothwholesaleandretailintermediariescarrydirectlycompetitiveproducts.

2.Manufacturerspreferintermediarieswhohandlecompatibleproducts.

3.Manufacturerslookfavorablyonintermediarieswhocarrycomplementaryproductsbecausetheyofferabetteroverallproductmixtotheircustomers.

4.Manufacturersseekintermediariesthatcarryproductlinesthatareequaltoorbetterthantheirownlines.Theydonotwanttobeassociatedwith“dog”linesiftheycanavoidit.

D）Reputation

Mostmanufacturerswillflatlyeliminateprospectiveintermediarieswhodonotenjoyagoodreputationintheircommunity.Forretailintermediaries,storeimageisanespeciallycriticalcomponentoftheretailer’soverallreputation.

E）MarketCoverage

Theadequacyoftheintermediaryincoveringthegeographicalterritorythatthemanufacturerwouldliketoreachisknownasmarketcoverage.Manufacturerswillattempttogetthebestterritorycoveragewithaminimumofoverlapping.

F）SalesPerformance

Themainconsiderationhereiswhethertheprospectiveintermediarycancaptureasmuchmarketshareasthemanufacturerexpects.

G）ManagementSuccession

Manyintermediariesaremanagedbythefirm’sowner/founderandmanyaresmallbusinesses.Therefore,thecontinuityofmanagementisacriticalfactor.

H）ManagementAbility

Manymanufacturersfeelthataprospectivechannelmemberisnotevenworthconsideringifthequalityofmanagementispoor.Oneofthekeydeterminantsofmanagement’sabilityistheirabilitytoorganize,train,andretainsalespeople.

I）Attitude

Thiscriterionappliesmainlytoaprospectiveintermediary’saggressiveness,enthusiasm,andinitiative.Thesequalitiesarebelievedtobecloselyrelatedtolong-termsuccessinhandlingthemanufacturer’sproduct.

J）Size

Sometimesaprospectiveintermediaryisjudged